Sidus Space reports $1.3M Q3 revenue drop, emphasizes strategic pivot to sustainable growth and diversified revenue sources.

Adarsh Parekh - Chief Financial Officer - (00:01:08)

Greetings and welcome to Sidus Space's 2025 Third Quarter Earnings Conference Call. At this time all participants are in a listen only mode. Please note this conference is being recorded as of today, November 14, 2025. I will now turn the conference over to Adarsh Parekh, Chief Financial Officer. Thank you. You may begin. Good evening everyone and thank you for joining us for Sidus Space's 2025 third quarter earnings conference Call. Joining us today from the company is Carol Craig, Chairwoman and Chief Executive Officer and myself, Adarsh Parekh, Chief Financial Officer. During today's call we may make certain forward looking statements. These statements are based on our current expectations with respect to the future of our business, the economy and other events and as a result are subject to risks and uncertainties. Many factors could cause actual results to differ materially from the forward looking statements made on this call. These factors include our ability to estimate operational expenses and liquidity needs, customer demand, supply chain delays, including launch providers and extended sales cycles. For more information about these risks and uncertainties, please refer to the risk factors in the Company's filings with the securities and Exchange Commission, each of which can be found on our website www.we also expect to discuss certain financial measures and information that are non GAAP measures as defined in the applicable SEC Rules and Regulations. Reconciliations to the Company's GAAP measures are included in the Management, Discussion and Analysis of Financial Conditions and Results of Operations section within Sidus third quarter 10q. For more information about these risks and uncertainties, please refer to the risk factors in the Company's filings with the SEC, each of which can be found on our website www.sidusspace.com. listeners are cautioned not to put any undue reliance on forward looking statements and the Company specifically disclaims any obligation to update the forward looking statements that may be discussed during this call. At this time I would like to turn the call over to Carol. Carol, please go ahead.

Carol Craig - Chairwoman and Chief Executive Officer - (00:03:43)

Thank you Adarsh Good evening and thank you all for joining us. On our second quarter earnings call we shared that Sidus Space is evolving into a diversified space and defense innovator, not just a satellite manufacturer, but a company with capabilities to span the full mission life cycle from low Earth orbit to the lunar environment beyond. In the third quarter we continued executing on this strategy by expanding our vertical integration, advancing our LISAT constellation and strengthening partnerships that support both commercial and defense customers. Our goal remains clear to deliver full spectrum solutions from design and manufacturing to on orbit operations and data services with the agility to meet evolving mission requirements we're building a company designed for long term sustainable growth driven by innovation, dual use and software defined satellites, all domain computing solutions and recurring data as a service opportunities. Over the past 18 months we've proven our ability to design, build, launch and operate advanced multi mission satellites with extended design life and complex functionality. These are not cubesats, they are precision engineered microsatellites built to deliver mission critical performance. Our vertically integrated model enables scalability and efficiency allowing us to adapt our manufacturing facility quickly to new priorities. Like our products, our operations are designed for adaptability and speed. Sidus is already a trusted part of the space supply chain and our offerings now extend across civil defense and commercial markets. This diversification strengthens our ability to support national security programs including Golden Dome, FDA's proliferated architecture and NASA's Artemis initiatives. Our multi mission all domain approach represents a new model for how space companies operate, combining agility, integration and strategic focus to meet diverse customer requirements. For those who are new to our story, Sidus has consistently executed on milestones while adapting to a very dynamic environment. During the third quarter, we navigated uncertainty around government funding and shifting federal budgets. However, our diversified revenue model which spans commercial, defense and civil sectors, provides a built in hedge against external risks. Having led through volatile environments such as this for over 25 years, I'm confident that CITIS is built to remain resilient and adaptable regardless of the external landscape. Over the last couple years, we've strategically invested in our infrastructure, technology and team to build capabilities comparable to larger competitors but with far less capital. The result is a lean efficient company with a competitive cost structure. An example of that are Software defined LiziSats with their five year design life and redundant systems delivering high performance at $5 million or less per 100 kilogram satellite, including multiple sensors and offering strong value for government and commercial customers. During this quarter, we made significant advancements towards completion of the Mobile Launch 2 contract. This program was originally approximately a $4 million contract that expanded to over $8 million over the last few years due to changing requirements and supply chain Dynamics. Over nearly four years, we built and will have delivered 57 complex electronic cabinets for installation at the Kennedy Space Center. With this program now nearing completion, we expect improved gross margins and stronger revenue visibility as well as a reconfigured facility ready for expanded satellite and defense manufacturing. At Citus, we believe our vertically integrated model sets us apart from our competition. Few US Companies can design, manufacture, test and operate their space hardware entirely in house while maintaining lean operations. This vertical integration gives us unmatched speed, control and flexibility enabling rapid entry into new markets, development of recurring revenue streams and leadership in the emerging multi domain space economy as well as the all domain defense industry. Our recent on orbit progress continues to validate our approach. We completed commissioning of the AIs sensor on Lizisat 3 and established direct communications with the customer site. We continued upgrading our flight software, integrating new algorithms and activating additional payloads aboard LISISAT 3. These advances strengthen our constellation architecture and accelerate technology maturation across all past and future LISISAT driven satellites and we successfully demonstrated that our satellites can support multiple sensors on a single versatile platform with the expectation of delivering fused data products that will increase mission value for maritime, environmental, defense and commercial customers. Our LISISAT platform is increasingly software defined enabling rapid in orbit reconfiguration and performance optimization. The next generation hyperspectral and multispectral cameras that we've selected to deliver our data services can adjust spectral bands and imaging modes dynamically allowing a single satellite to serve multiple missions from maritime awareness to environmental monitoring, defense intelligence Combined with our onboard AI and our Featheredge Edge processing suite, LISAT is designed to learn and adapt in orbit, improving data quality and operational efficiency over time. As global demand rises for resilient, secure and cost effective space capabilities, we believe Sidus is well positioned to meet that need. Our modular multi use solutions spanning satellites, onboard AI and VPX SOSA line electronics enable customers to rapidly deploy and reconfigure systems for maritime, environmental, defense and commercial missions. This flexibility shortens development cycles, reduces costs and increases mission readiness. A key differentiator is the United States and allied governments prioritize distributed software defined architectures. This quarter we completed two successful capital raises with funds to be invested in commercializing all domain product lines, expanding the LISI sat constellation with LISAT 4 and LIZISAT 5 and advancing our Orlaith AI ecosystem. We also progressed our Fortis VPX computing suite designed for aerospace, defense, energy, robotics and autonomous Systems. The first three products including the Citus Single Board Computer, FearEdge 248 VI Edge Computer and precision Navigation timing module are on track for year end validation. The Citus Single board computer offers on orbit and terrestrial edge computing. The Featheredge 248 VI features artificial intelligence and machine learning processors designed for extreme environments and size constrained applications and the Precision navigation and timing module integrates atomic clocks, M code, gnss and imus for GPS denied operations. This modular Fortis platform establishes a scalable all domain command and control architecture complementing our space platforms and is expected to contribute meaningfully to revenue starting in 2026. From a program execution standpoint, we remain focused on expanding our technology portfolio and delivering solutions aligned with our long term vision and mission. A key element of reaching our upcoming milestones is completing the Mobile Launcher 2 contract which will allow us to shift additional resources toward higher margin satellite and data programs. As noted earlier, we currently have two additional LISISAT spacecraft in production for a planned late 2026 launch. These satellites will feature advanced software, defined imagers and increased onboard processing capability. Additionally, we're hosting multiple customer technologies. Customers for these missions and related prelaunch revenue include the Netherlands Organization, Lone Star holdings and additional data customers that we have not yet announced. Achieving this initial fast launch cadence was critical to our ability to learn, adapt and advance our technology in real time. In just over a year we launched three Citus designed. Citus built hybrid 3D printed satellites with onboard AI and multiple sensors at a pace that allowed us to rapidly integrate lessons learned into each successive mission. Every launch informed the next, enabling continuous improvement, faster integration and greater scalability across our architecture. This rapid cadence of innovation is not limited to low earth orbit. It's foundational to how we are expanding capability across all domains and all orbital classes. Looking beyond leo, we're developing a lunar capable LISAT platform featuring higher power, advanced radios and enhanced propulsion. Few U.S. companies can offer this level of multi domain, multi orbit versatility and we believe it positions Citus as a truly differentiated supplier for the emerging lunar and cislunar mission landscape. In summary, Cituspace continues to execute on its plan to deliver next generation technologies from dual use, multi mission satellites and all domain computing systems to AI driven data architectures. Our progress this quarter reinforces the foundation for long term growth, recurring revenue and sustained leadership across the expanding space and defense ecosystem. I'll now turn the call over to Avish for the financial update.

Avish - (00:13:25)

Thank you Carol. At Sidus, we continue to build a scalable, vertically integrated company across space technology and artificial intelligence. Our focus remains on operational excellence, rapid innovation and and delivering cost effective high impact solutions for our customers. Our investments to date have centered on expanding our satellite constellation, advancing innovation and implementing a robust ERP system to support scale and profitability momentum from 2024 and the first half of 2025 carried into the third quarter of 2025 which reflects both our transition to commercialization of dual use multi domain products and the near term financial impacts of scaling a deep tech space based enterprise. During the third quarter of 2025 we continued our progress in establishing Sidus Space as a mission enabler. Our rich space and defense heritage positions us to take advantage of opportunities across multiple sectors with a combined focus on commercial space innovation and national defense priorities. Lets review our results starting with the nine months ended September 30, 2025. Total revenue for the first nine months of 2025 was approximately $2.8 million compared to $3.8 million in the same period in 2024. While this reflects a decrease of about $1 million or 27%, the change aligns with our strategic shift away from legacy contract work to toward higher value commercial space and AI driven solutions. This repositioning is intentional and expected to generate more sustainable recurring revenue in future periods. The impact of milestone based revenue recognition also influenced year over year performance and comparison. Cost of revenue rose to approximately $0.8 million, a 48% increase from $4.6 million during the first nine months of 2024. Key contributors to the cost of revenue included a $1.6 million increase in depreciation tied to satellite and software investments A changing contracts mix requiring greater material and labor inputs Ongoing global supply chain pressures impacting manufacturing operations. Gross loss for the period was approximately $4 million compared to a loss of about $719,000 in the same period last year. This increased gross loss reflects increased depreciation which is non cash and directly tied to recent investments that position us for future revenue generation. The transition away from legacy high margin contracts as we focus on long term value added offerings A shift in contract structure which is expected to yield greater returns in future quarters when adding back satellite related depreciation. Gross loss for the period was $1.2 million compared to a profit of $485,000 in the same period last year. Selling general and Administrative expenses totaled $13 million compared to $9.9 million in the prior year. This $3.1 million increase supported key growth initiatives including strategic headcount additions to support scale and expanded employee benefits to remain competitive. Equity based compensation and performance based bonuses initiated during 2025 increased mission operations expenses to support our growing Constellation infrastructure investments in software tools, depreciation expense and launch rebooking fees as well as payoff of our decathlon note payable as described further in the Notes to the Consolidated Financial Statement. To provide a broader view of our performance, we also report adjusted ebitda, a non GAAP measure we use internally to guide strategic decision making. Adjusted EBITDA loss for the first nine months was $12.6 million compared to $8.3 million in the same period last year, reflecting ongoing investment in scaling our platform. The reconciliation table including interest, depreciation, fundraising, severance and equity related expenses is included in our Q3 2025 earnings release. For the three months ended September 30, 2025, total revenue reached $1.3 million, a 31% decrease compared to about $1.9 million in Q3 2024. This reduction was primarily due to the timing of fixed price milestone contracts, including projects executed through our related party, Craig Technologies. Cost of revenue for the quarter rose to $2.6 million, up 42% from the prior year. This increase reflects the $501,000 increase in satellite and software related depreciation, higher input costs for more complex contracts ongoing global supply chain cost pressures. Gross profit for Q3 2025 was a loss of $1.3 million compared to a profit of $38,000 in Q3 2024. Increase in gross loss was primarily due to higher depreciation from recently capitalized assets, which are essential to future revenue streams. Contract mix evolution reduced contribution from legacy services as we transition to higher margin recurring revenue models. When adding back satellite related depreciation, Gross loss for the period was $277,000 compared to a profit of $559,000 in the same period last year. SGA expenses for the quarter totaled $4.3 million, up from $3.2 million in Q3 2024. Key drivers included strategic headcount growth aligned with our move to higher value offerings, expanded mission operations for satellite support, increased software infrastructure investment, accrued equity compensation, employee bonuses and higher depreciation expense. Adjusted EBITDA loss for Q3 2025 was $4.0 million, a 62% increase from Q3 2024. The change reflects continued scaling efforts and is supported by full reconciliation details in our Q3 2025 press release. Net loss for the quarter was $6 million compared to $3.9 million in the same period of the prior year. As noted, this increase is primarily tied to strategic investments in infrastructure, personnel and operational capacity as well as non cash depreciation related to our expanding satellite constellation. Turning to the balance sheet, as of September 30, 2025, Sidus had $12.7 million in cash compared to $15.7 million as of September 30, 2024. During the quarter, we completed two public offerings of 16.9 million total shares of Class A common stock from which Sidus received approximately $15.5 million of net proceeds. As we Move forward, we continue to manage cash conservatively while making strategic investments in our next generation satellite builds and high growth product lines. Additionally, by the end of Q4 we expect to implement meaningful cost reduction activity and operating efficiencies to support long term profitability. With that, I'll hand the call back to Carol for closing remarks.

Carol Craig - Chairwoman and Chief Executive Officer - (00:21:09)

Thank you Adish. The milestones we achieved this quarter are more than operational wins. They create pathways to future revenue across commercial, civilization and defense markets. Each satellite launch, hardware delivery and AI demonstration strengthens our track record and reinforces Sidus as a trusted partner for critical missions. Sustaining that momentum requires constant innovation, which is why we continue to invest in internal R and D, advance new technologies and grow our patent portfolio to protect our IP and increase the value of our platform. Our technologies, designs and capabilities now span the full spectrum of space from LEO to GEO to lunar missions, expanding our relevance and reach. Whether hosting government payloads in orbit, enabling edge AI for real time data delivery, or contributing to long term lunar infrastructure, we're building a presence that touches every layer of the evolving space economy. Sidus is not just building satellites, we're enabling the next generation of real time intelligent data connectivity by linking sea, ground, air and space into one integrated domain. This from sea to space diversification strategy reduces reliance on any single market segment and essential to driving long term sustainable growth. Our mission remains the same deliver reliable, scalable and intelligent solutions from initial design through deployment. Our vertically integrated model and culture of innovation give us a strategic advantage allowing us to innovate faster, control quality across the lifecycle and bring advanced technologies to market more efficiently than traditional aerospace providers. As you've heard, today, Sidus continues to shift from R and D and infrastructure build out to commercialization and revenue generation. We've launched and begun commissioning our third satellite established the foundation for a scalable micro constellation and we introduced a new generation of rugged dual use technologies. Lean operations allow us to operate with lower fixed costs, offer competitive prices and pursue strategically valuable contracts that may be overlooked by larger players. As we continue to build meaningful momentum and a stronger foundation for the future, we've strengthened our balance sheet, launched high potential new platforms like Orlaith and Fortis VPX and are positioned to generate diversified revenue in 2026. The path forward is ambitious, but it's the right path for unlocking sustainable growth. Our all domain multi revenue model enables us to adapt quickly, serve diverse customers and scale with demand and now I'd like to address some of the questions we received. The first one is how should we think about the Commercialization timeline for Fortis vpx well, our first three VPX products remain on track for release to production in January of 2026. We expect customer integrations and revenue contributions to begin shortly thereafter. Interest in the Fortis product line spans from defense, aerospace, robotics and autonomous systems. Second question can you update us on the commissioning timeline for LS3 and how additional satellites change your revenue model? The LS3 commissioning is progressing well because there are multiple payloads and sensors along with our integration of updated and enhanced software. It isn't a quick process, but our satellites have a five year design life and were manufactured with that timeline in mind. The additional satellites in production currently LS4 and LS5 expand hosted payload capability, data availability and on orbit AI throughout. We've improved the data rates and we've added software defined subsystems as well. And because of the nature of the software defined imagers, we expect increasing data contributions from more industries and customer missions from LS4 and LS5. Next our customers Already evaluating Fortis VPX or Featheredge? Yes, we have active early access programs with both government and commercial customers for our proven Featheredge platform and several have already begun transitioning toward multi year hardware agreements. And we've also received positive market feedback in response to our conceptual introduction of Fortis vpx. What does your geographic revenue mix look like going forward? Well, we see strong momentum internationally, especially among allies seeking sovereign US origin multi domain capabilities within the us. Greater budget clarity is helping stabilize and improve program timelines which we view as an upside. Next question how should we think about backlog composition? Our backlog is increasingly being driven by bvx, DOSA hardware engineering Services and LISI satisfaction integrations. These are multi year high visibility contracts with strong alignment to defense modernization priorities. How does the recent capital raise position the company? The recent capital raise funds a significant portion of our near term product commercialization, LISI, SAT scaling and AI development. The capital is intended to accelerate innovation and fund growth and a popular question is can you expand on alignment with the DoD's Golden Dome vision? So the DoD's Golden Dome vision centers on creating a resilient distributed multi layered sensing and communications architecture that spans all domains air, land, sea, space and cyber. We believe Citus Technology Roadmap aligns directly with that need. Our strengths in autonomy, rapid deployment, ruggedized edge computing and multi mission sensing allow us to deliver space based nodes that are capable of operating as part of a larger adaptive defense network. We also believe that our LISI SATS platform's ability to host multiple sensors, process data at the edge and push actionable intelligence to users in real time makes it ideally suited for golden dome style architectures that value speed, survivability and interoperability. As the Department moves toward more proliferated and software defined systems, we see increasing opportunity for Sidus across both unclassified demonstrations and classified programs that require adaptable, resilient and rapidly upgradable satellites. And lastly, what is the potential market for your lunar capable LISZI lunar platform? NASA, commercial lunar initiatives and allied nations are all expanding lunar exploration and infrastructure programs. There are very few US Companies that can provide smaller cost effective lunar buses and we believe our early mover position creates a strategic opportunity. And as we've already demonstrated, we have been selected to build lunar satellites for commercial customers and with that I want to thank our employees, partners and shareholders for your continued trust and support. We look forward to delivering strong progress in the months ahead.

OPERATOR - (00:28:25)

Thank you ladies and gentlemen. Thank you for your participation. This does conclude today's teleconference. Please disconnect your lines and have a wonderful day.